Massachusetts State Life Insurance Practice Exam

Which benefit does whole life insurance provide that term life insurance usually does not?

1. A guaranteed death benefit and cash value accumulation

2. Lower initial premium payments

3. Premiums that decrease as the insured ages

4. Only death benefits with no cash value options

The correct answer is: A guaranteed death benefit and cash value accumulation

Whole life insurance is designed to offer lifelong coverage and includes specific features that differentiate it from term life insurance, primarily the accumulation of cash value and a guaranteed death benefit. The guaranteed death benefit in whole life insurance ensures that the beneficiaries will receive a predefined amount upon the policyholder's death, regardless of when that occurs, as long as premiums are paid. This aspect provides a sense of security and financial planning for one’s family or dependents. On the other hand, term life insurance provides coverage for a specified period and typically focuses solely on the death benefit without an accumulation of cash value. Additionally, whole life insurance policies accumulate cash value over time, which policyholders can borrow against or withdraw. This cash value grows on a tax-deferred basis and can serve as a financial resource during the insured's lifetime. Term life insurance does not have this feature, as it is primarily intended to provide temporary protection without any savings or investment components. Thus, the combination of a guaranteed death benefit and cash value accumulation is a defining characteristic of whole life insurance, making the provided answer accurate in highlighting what whole life insurance offers that term life insurance typically does not.